Saturday, May 21, 2016

Associations representing state departments of transportation, legislatures and the nation's governors worked this month to head off a Senate appropriations provision that could potentially take away billions of dollars in already-authorized highway funds.

The groups sent joint letters to Senate and House appropriations committee leaders warning that a proposed rescission of $2.211 billion in contract authority for state DOTs, for the federal fiscal year that begins Oct. 1, could "force states to cut actual highway expenditures at a time when we need to be investing in our nation's infrastructure."

They also said the proposed fiscal 2017 rescission, along with another $7.6 billion in rescissions already scheduled to hit in 2020 under the five-year FAST Act, have the effect of "potentially eliminating the modest investment gains made in the FAST Act."

The May 11 letters were signed by the executive directors of the National Governors Association, the National Conference of State Legislatures and the American Association of State Highway and Transportation Officials. The Senate passed its appropriations bill May 19 that covered Department of Transportation spending, and which contained the $2.2 billion rescission for the coming year.

The threat facing state highway spending stems from arcane federal budget procedures, and how Congress "scores" legislation against 10-year spending projections, said AASHTO senior staff officials. But the state groups warned congressional appropriators that the rescissions issue "is not a simple and harmless budgetary maneuver."

Jim Tymon, AASHTO's chief operating officer and formerly a federal budget specialist and staff director to the Highways and Transit Subcommittee for the House Transportation and Infrastructure Committee, told the AASHTO Journal the Senate's proposed 2017 cut poses a stronger threat to states than many past rescissions. That's because of how quickly it would take effect and how narrowly it would apply.

State DOTs have already drawn up project lists for the year ahead, and most are on budget years that start in July instead of the federal year that starts in October. Many state legislatures have also wrapped up their year-ahead budgets, so they would not be able to quickly deal with any sudden federal funding cuts. And the Senate would apply the cuts to just a portion of federal highway programs.

"The Senate's proposed 2017 rescission would cause big programming headaches for state DOTs," Tymon said, "because many states have planned for projects that would be funded from the specific federal program categories that would be subject to that rescission."

AASHTO officials explained that Congress has traditionally, through long-term surface transportation bills such as the FAST Act, authorized the many highway account programs supported by the Highway Trust Fund to receive specific "contract authority" levels that are apportioned to states under a formula.

But to hold to agreed spending goals in annual appropriations bills, lawmakers also held states to lower levels of "obligation limitation" that capped what each state could actually spend in a given fiscal year – with that limit historically set about 10 percent below the contract authority amount, AASHTO staff said.

Over time, the gap between the authorized contract authority and the lower annual obligation limitation that states could actually use created a book-keeping balance of unspent highway contract authority that carried over from year to year, even though state DOTs could not reach into that balance and spend the so-called "excess" funds beyond their annual limits.

And in 14 times between 2002 and 2011, AASHTO staff said, Congress pulled back or "rescinded" some of that unspent balance of authorized authority to offset other federal spending or to reduce the overall deficit in lawmakers' long-term projections.

Now, in addition to targeting only the state DOTs' portion of unspent contract authority – as opposed to also applying the rescission more broadly to federal lands, earmarks and other types of highway funds – the Senate provision would force state DOTs to remove the unused contract authority funds in a uniform percentage across a specific portion of highway program categories.

AASHTO staff said that would prevent each state from protecting its highest-priority program allocations from the rescission – in other words, prevent states from spending actual dollars where they need them most, to make up for past contract authority they were not allowed to use.

The FAST Act's 2020 rescission of $7.6 billion would also apply the contract authority cuts across a narrow range of programs, and could disrupt project plans for state DOTs unless Congress drops that requirement well ahead of the 2020 budget year.

For example, it shows that Arkansas, where a special legislative session is trying to find more road funding, could lose about $30 million in a 2017 rescission and $104 million more in 2020. A bigger state like Texas would face larger cuts of about $174 million next year, $595 million in 2020.

Tymon noted the proposed House appropriations bill that covers the U.S. Department of Transportation did not include the 2017 highway funds rescission, a development that gives states some hope the Senate provision might not become law for the year ahead.

But he warned that any eventual House-Senate conference on a final spending bill – or on a broader "omnibus" bill to fund the entire government – could still include some form of a rescission unless Senate appropriators agree to remove the provision.

He also said that what Congress is doing with the contract authority and rescissions appears to be unique to highway programs. While some other federal budget accounts provide contract authority to pay for construction programs, including those under the Federal Aviation Administration and the Federal Transit Administration, Congress has not rescinded contract authority from those programs the way it has from the highway program.